CC – CDS 219bps, Base Case iCDS 157bps, Negative Case iCDS 242bps, 2027 5.375% Bond YTW of 5.332%, iYTW of 3.422%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

March 1, 2022

  • Cash bond markets are materially overstating CC’s credit risk with a YTW of 5.332%, relative to an Intrinsic YTW of 3.422%. Meanwhile, CDS markets are slightly overstating CC’s credit risk with a CDS of 219bps relative to an Intrinsic CDS of 157bps. Furthermore, Moody’s is materially overstating the company’s fundamental credit risk, with its speculative Ba3 credit rating five notches lower than Valens’ IG4+ (Baa1) credit rating.

  • Incentive Dictate Behavior™ analysis highlights mostly positive signals for creditors. CC’s compensation framework incentivizes management to improve all three value drivers: sales, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing obligations going forward. Moreover, most management members are not well-compensated in a change in control, indicating they are not incentivized to pursue a sale or accept a buyout of the firm, reducing event risk.

  • Valens’ qualitative analysis of the firm’s Q4 2021 earnings call highlights that management is confident they have high-quality operations.

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